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How to set up automatic billing for your subscription business

How to set up automatic billing for your subscription business

It’s easy to see why the subscription model has become increasingly popular across all industries and markets. Subscription businesses can enjoy an almost guaranteed recurring income, while customers can benefit from the convenience of a subscription to their favorite product or service.

When you’re offering a subscription that renews at regular intervals, your billing strategy must be fit for purpose. This means that your billing strategy should be effective, scaleable, and automated.

In general, automation for online businesses is a no-brainer. Automation is the key to minimizing manual work, reducing human errors, and offering convenience to your customers, which encourages them to stick around for longer. Not to mention you save a ton of time!

So let’s learn about how automatic invoices are a game changer for your business.

Understanding automated invoices

Automatic invoices are part of an automated billing system, where customers are charged for a product or service, on an ongoing and recurring basis. As the seller, you don’t have to lift a finger.

Subscription-based businesses frequently use this model, as it eliminates the need to manually send out invoices.This not only saves you lots of time, but also reduces the risk of late payments or non-payments. Using an automated system for billing offers a streamlined experience for both you and the customer.

Generally, it works in the following way:

  1. The customer selects the pricing plan that suits their needs (e.g. how often will they be billed).
  2. The customer selects their preferred payment method (e.g. credit or debit card).
  3. The customer agrees that their preferred payment method will be kept on file by the billing software.
  4. When the next billing cycle comes around, the recurring payment is charged to the customer’s card that is on file.
  5. The customer receives an invoice for the transaction right away! If the payment has failed, they receive follow-up instructions.
  6. The payment will continue at the agreed intervals until the customer pauses or cancels their subscription.

Benefits of automated billing for subscription businesses

Automated billing and automatic invoices have many benefits for online businesses, including:

  1. Accuracy and efficiency
  2. Time and cost savings
  3. Easy subscription management

1. Accuracy and efficiency

With automated billing, you no longer need to manually create and send invoices. Clearly, this is a more efficient billing method, especially for subscription businesses using a recurring revenue model. A billing system which is automated also reduces the risk of human error, so you don’t need to worry about miscalculations in your tax returns.

2. Time and cost savings

You can save lots of time by reducing the manual work involved in your billing system to virtually zero. The time that would have been spent on sending invoices, processing payments, and chasing up late payments can be used instead in other areas of the business.

Not only will this type of billing system save you time, but it will save you money on human resources. What’s more because your subscription service will be more convenient and appealing to your customers, you will likely gain more income by attracting more repeat customers.

3. Easy subscription management

With the right automated billing system, you and your customers can easily manage subscriptions without overcomplicating the process. A good billing system will be able to handle:

  • Prorations: when a customer makes changes to their subscription in the middle of their billing cycle, the system can adjust the amount accordingly.
  • Discounts or coupons: if you want to offer occasional discounts or coupon codes, you can use your automatic billing system to reflect the discount automatically.
  • Calendar billing: customers can change their billing date to suit their needs, and your automated billing system automatically aligns the upcoming payments to the new date.
  • Grandfathering: this allows for older customers to stay on an older pricing model (which they signed up to), while new customers start on a higher rate.

To ensure comprehensive financial management, you may also wish to consider integrating your automated billing system with an efficient accounts payable system. By seamlessly integrating accounts payable processes, you can ensure accurate tracking of outgoing payments, manage vendor relationships effectively, and optimize your cash flow.

3 Factors of Automated Billing

When starting an online business and considering how to build your website, you do lots of research. The same is when you’re choosing a new tool to integrate!

If you want to set up an automated billing system for your subscription business, here are three factors to consider when choosing your automated billing system:

  1. Subscription management and pricing structure
  2. Integration with your other business tools
  3. Billing and invoice automation

1. Subscription management and pricing structure

Your billing system must accommodate your pricing structure. Consider the subscription plans you offer, how much flexibility customers have within each plan, and how you’re charging for the product or service in question. You might offer flat-rate monthly or annual subscriptions, or a tiered subscription pricing plan. Some businesses opt for usage tracking or metered pricing, where customers only pay for “what they use” each  billing cycle. Learn more about how to price your subscription.

If you’re an international business operating in different currencies, your billing system should be able to handle multiple currencies and possibly different pricing plans per region. For example, subscription orders detected from .il domains in Israel may have a different pricing structure than US orders.

2. Integration with your other business tools

Your automated billing system should integrate with existing business tools to sync with and centralize data from across your business, and even communicate with your customers. This could include connecting with your accounting software, email marketing system, or CRMs.

Your billing system needs to integrate with these tools to reduce errors and effectively streamline your business. This is why it’s called automated!

3. Billing and invoicing automation

Clearly, billing and invoicing are intrinsically linked. Your automated billing solution should be able to automate recurring invoices and take the hassle out of the whole invoicing process. With this type of system, such as Quaderno Billing, you can customize invoices based on your business and customers’ needs.

Ensuring Success and Best Practices

So, you’ve decided that automated billing is a must-have for your business! How do you ensure success with your billing system?

Create a positive customer experience

Customers are always looking for convenience, and you can give them just that. When setting up your billing system, ensure you give your customers the convenience and flexibility they seek. Allow them to choose the subscription plan that best meets their needs and then easily manage their subscriptions without any complicated or lengthy processes.

Quaderno Billing, for example, can customize invoices to the customer's local language or currency and provide customers with an easy-to-use dashboard to manage their payment details. Giving customers this autonomy and flexibility creates a more positive customer experience, encourages higher customer retention and increases your revenue.

Testing and quality assurance

Like any new venture in your business, you need to ensure you regularly test your billing system for quality assurance. It is essential that your automated billing system is fit for purpose and meets the needs of your business. Before you launch your new system, ensure you have a plan for testing it too.

Monitoring and analytics

Your subscription data offers valuable insights into customer habits and key metrics such as churn rate and monthly recurring revenue. This means you can collect and analyze valuable data on financial metrics which will help you grow your business.

These types of analytics can tell you a lot about how your subscription business is performing. You may find that you gain more subscribers at a particular time of year, or that your churn rate is slowly increasing.

Knowing this information and understanding key metrics in your business allows you to make strategic decisions and ensure you are set up for success in your subscription business.

Continuous improvement and scalability

Scaling your business doesn’t have to be complicated or overwhelming. Automated billing for your subscription business means it is much easier to scale. The almost-guaranteed income that’s generated from subscriptions means that your revenue is somewhat predictable, allowing you to plan for growth more confidently.

Final thoughts

If you’re looking for a solution to automated billing, consider Quaderno. Quaderno provides automatic invoices that save time and boost your customer experience. In fact, these invoices can be customized to your brand – and even localized to your customer’s currency and language!

Not only that, but Quaderno’s tax compliance engine makes sure you always charge the right amount of sales tax, VAT or GST on every sale. This saves you even more time and stress, as you continue to scale your business. Plus, these automatic invoices are always tax-compliant with local rules, and you’ll be ready to file tax returns with ease.

Set up automated billing by:

  1. Creating a Quaderno account
  2. Connecting your sales channels and payment processors
  3. That’s it! Automatic invoices will start flowing.

Interested? Try Quaderno for free for 7 days. No credit card necessary.

Thanks to Francis King from OnlyDomains for sharing his expertise and writing this article for us!

Note: At Quaderno we love providing helpful information and best practices about taxes, but we are not certified tax advisors. For further help, or if you are ever in doubt, please consult a professional tax advisor or the tax authorities.